It works in Israel if you have an Israeli Visa Card which is not hard to get. Once the money enters your Paypal account - Paypal will tell you how much it is worth in shekels. I got my Israeli visa card at the Supersol Supermarket.

When you are ready you can withdraw your money from PayPal using your Israeli-issued Visa card. The money will end up in the personal bank account in Israel that is linked to that Visa card. The next time that Visa settles transactions with your bank account, the money from your PayPal account will be deposited. This is what I do!

I recently received information from PayPal that very soon PayPal will work with any Israeli bank account, allowing you to transfer the money from PayPal to your bank account without needing to pass the transaction through your credit card. All in good time.